The Way Out History, current policies, and personal stories show us debt doesn’t have to be forever.

The Debt SketchbookYES! Illustration by Serge Bloch

Debt Relief? We’ve Done It Before

Text by Lindsey WeedstonYES&excl; illustration by Jennifer Luxton

When citizens have become overburdened by debt, governments have stepped in using creative monetary policy — from bankruptcy laws to forced inflation to total debt cancellation. Here’s how it’s been done.

The Giant Loan Cancellation Experiment

Ava Kofman

When Camille Schenkkan had to take out thousands of dollars in student loans to pay for Claremont School of Management’s graduate program, she told herself not to worry. She had learned from colleagues also entering the field of arts education about a U.S. government program that would reward her if she spent 10 years making loan payments while working in a nonprofit. Which was exactly the field she wanted to enter anyway. The reward? A large chunk of her student loans would be forgiven as part of the Public Service Loan Forgiveness program (PSLF).

Ava Kofman is a journalist based in New York. Her work has appeared in The Atlantic, The Nation, and Vice, among other places.

PSLF is not the first forgiveness or assistance program for public servants. Smaller state, federal, local, and university programs have used loan assistance to effectively encourage students to become teachers and public-sector doctors, nurses, and lawyers, often for less pay than in the private sector. But the PSLF program is by far the largest experiment of its kind — both in the scope and scale of its forgiveness. With 25 percent of the nation working in “public service” as the program defines it and some 70 percent of graduates leaving college with student debt — now averaging more than $30,000 — millions stand to profit from the PSLF program’s cancellation of debt.

For Schenkkan, the promise of forgiveness allows her to pursue her passion and offers an early escape from crushing student debt. “It was a carrot of a way you could actually do this,” she said.

But the program’s virtues get lost in byzantine complexity. In order to qualify for its reward, borrowers have to navigate a series of uncoordinated and often unresponsive Kafkaesque bureaucracies, making the program’s promise of forgiveness appear less like a panacea and more like a question mark.

The PSLF program was created in 2007, during the twilight years of the Bush Administration, as part of the College Cost Reduction and Access Act (CCRAA). Previous piecemeal efforts at forgiveness programs weren’t fulfilling a broad enough goal: to encourage people to choose positions in public service and to help them keep those jobs long-term. Panics over predicted labor shortages in hospitals, public schools, and public defenders’ offices indicated to lawmakers that a broader-based program to maintain this critical work was needed. Enter the bipartisan and ambitious CCRAA, widely described at the time as “the single largest investment in higher education since the GI Bill.”

The way it works, in theory, is straightforward:

1. You have to work full time for the government or at a 501(c)(3) or other eligible nonprofit (as specified in detail on the Federal Student Aid website).

2. You have to make 120 qualifying payments on an eligible plan toward a consolidated direct federal loan. The Income-Based Repayment (IBR) plan caps monthly payments at 15 percent of your discretionary income (which can be as small as zero); choosing the right repayment program, which will often be IBR, is key to maximizing the program’s benefits.

3. Once you’ve made 120 payments that meet these requirements — they can be non-consecutive — you can then apply for forgiveness: cancellation of the entire remaining loan balance, tax-free.

In other words, 10 years of public work and qualifying payments mean that the thousands, sometimes hundreds of thousands, of dollars hanging over your head like Damocles’ sword will disappear, once and for all. Considering that many jobs in the public sector require graduate degrees, the effects could be enormous. PSLF might even help to defuse the time bomb of national student debt, which now totals more than $1.3 trillion.

But in practice, every step of PSLF’s process has been extremely confusing — not least because the federal government planned none of them in advance. Many of the required provisions of the program did not exist until years after it was technically underway. Two of the qualifying repayment plans for PSLF — IBR and Pay As You Earn (PAYE) — took effect in 2009 and 2012, respectively. No “Dear Borrower” letter laying out the specifications of the program existed until 2011. Borrowers could not find out if their employment formally qualified and what counted as full time, as part time, or as a proper nonprofit — and therefore, how many qualifying payments they had made — until 2012, when the employment certification form was first introduced.

Angela Mrozinski, who has been making payments toward forgiveness for four years, has found the touch-and-go development of such an extensive program disconcerting. “It seemed so odd to me that they have this large program, but they are trying to formalize it as they go,” she said.

Student loan lawyers and advocates (many of them borrowers themselves) say that the opaque process, and lack of assistance offered, leads some people to give up. “They don’t make it easy,” said Claire Crowley, a student loan lawyer. “Which is also one of the reasons that people go into default.”

In 2011, Schenkkan consolidated her federal loans, chose a payment plan, and began making payments toward forgiveness. But in spring 2012, she received a letter informing her that she had made zero qualifying payments, despite the fact that she had been paying for more than 12 months. After many phone calls, she discovered she was on the wrong version of the standard repayment plan: The standard 10-year repayment plan qualified for PSLF, but her 25-year repayment plan, then also called a standard plan, didn’t, despite the fact that there would be nothing left to forgive at the end of a 10-year repayment plan. The Department of Education’s website at the time did not clarify this distinction, she said.

Schenkkan is hardly the only borrower to have missed this difference. Her friend Neal Spinler, who thought he had been paying toward PSLF for two years, made the same error. Many others have made months, sometimes years, of payments only to discover that none of them qualified.

Their experience drives home what longtime student loan lawyer and advocate Heather Jarvis calls the “convoluted complexity” of the entire system. Schenkkan previously worked as a grant writer and considers herself financially literate, but as Jarvis explained, “It doesn’t matter how long you spend on your research and how sophisticated you are because it’s incredibly hard to navigate even when you have accurate information.”

In the decade-plus journey toward forgiveness, borrowers have no way of knowing whether their applications will be accepted. Adding to this uncertainty: The last and most important step of the program is still under construction. The application form for forgiveness does not yet exist. The Department of Education has stated that forms will be available closer to the first eligible date, in 2017.

Spinler didn’t think he would finish paying off his student loans before he was 60, but if all goes according to plan, even in spite of his two lost years, he will qualify for forgiveness in 2022, when he’s 47. Assuming that a quarter of the roughly four million borrowers on a qualifying plan who stand to benefit from the program are public servants, about a million people like Spinler potentially qualify for the program each year. But exact numbers on program participants are impossible to find — because they don’t exist.

That’s because the program isn’t quite a program yet. Even when borrowers obtain correct information about PSLF and take steps to become eligible, they are technically not accepted into the program until after they have made all 120 qualifying payments and applied. This means that the earliest anyone would be eligible to actually enter the forgiveness program is 2017. The Department of Education has no way of keeping count because borrowers may not have voluntarily submitted their most recent employment certification forms. According to a Department of Education spokesperson, nearly 360,000 unique employer certification forms have been submitted as of May 2015. There is no strict requirement that borrowers complete any of the forms until they apply for forgiveness, at which point they are expected to assemble a decade’s worth of documentation as proof.

The stakes are high — and not just for the government. Mrozinski, Schenkkan, and Spinler, among many others, report experiencing doubt, uncertainty, and severe stress throughout the process. Each discussed how the requirements of the PSLF program, along with the usual burden of student loans, affected their search for jobs, working schedules, and family planning.

“You have to make very important decisions that have far-reaching financial implications to take advantage of the benefits,” said Jarvis, “like considering whether to postpone and delay children.” Jarvis added that the stress borrowers feel is understandable. “They’re pioneers in the program, and they don’t have any history, experience, or precedent to rely upon.”

Borrowers are concerned about President Obama’s twice-floated budget proposal to cap the amount forgiven by the program at $57,000, which would limit the program’s benefits for those who need them most. More than one in four public defenders surveyed by the National Legal Aid and Defender Association have in excess of $175,000 in student loan debt, and over half said they would leave the public sector if the program were capped. Legislators have also toyed with the idea of eliminating the program entirely, but all four student loan lawyers interviewed stated that a total termination of the program is not only extremely unlikely but would also not affect those who’ve already taken out loans.

But the program’s “all-or-nothing” benefits are perhaps the most terrifying part. “If it all works out, my loans will be forgiven, and it will be amazing, and I’m really sort of counting on that,” Mrozinski said. “But once people hit this 10-year mark and the government starts to forgive these loans, where is this money going to come from? Are they actually going to support it once they put their money where their mouth is?

Any reform to PSLF has the potential for huge effects — for better or for worse. What’s clear is that for the program to be as powerful as it intends, more transparency and simplicity is needed. The Consumer Financial Protection Bureau (CFPB) estimates that about one in four workers in the United States qualifies for PSLF, but it’s unknown how many qualify yet fail to take advantage of the program. The complexity of program requirements and confusion of program options, the CFPB stated, may act as a “deterrent for borrowers weighing a career in public service.” Jarvis says that the program’s benefits are not as effective as they could be had the program been “simplified and easier to access.”

The Student Aid Bill of Rights, to be implemented within the next year, should streamline some aspects of the process for borrowers. There have been some efforts on the part of the Department of Education to promote the program’s existence to the millions who might be eligible: a revised website, the introduction of necessary forms, and a more simplified and streamlined presentation of the necessary information. According to a Department of Education spokesperson, the Federal Student Aid office, which oversees PSLF, will be planning its first direct outreach campaign about the program to borrowers later in 2015. To help employers provide information about loan forgiveness programs to their employees, the CFPB issued a toolkit and asked public service employers to contact them to take a “Public Service Pledge.”

But student advocates, including Jarvis, have said that until the government and contracted loan servicers are also mandated to provide their clients with full information about available programs, and until outreach efforts become formalized, PSLF’s crucial benefits will remain unsung. In the coming months, the CFPB will release the results of its investigation of servicers failing to provide information or providing misleading information.

For now, the program’s potential beneficiaries can only hope. Schenkkan always educates the intern program she runs all about PSLF and how exciting it is. “But a part of me is worried that it will go away,” she said. “It still seems too good to be true.” If all goes to plan, billions of dollars in student loans will annually disappear. It’s no rolling jubilee, but it’s a giant leap for studentkind.

Ava Kofman is a journalist based in New York. Her work has appeared in The Atlantic, The Nation, and Vice, among other places.

Essay: Elegy to Family Obligation

Shin Yu Pai

I was never fully aware of my parents’ debt until having to apply for college financial aid. Poring over the universal financial aid application, I read my father a series of almost clinical questions about our family’s debt, income, and savings.

Shin Yu Pai is the author of several poetry collections, most recently AUX ARCS (La Alameda, 2013) and Adamantine (White Pine, 2010). Her essays have appeared in Tricycle, ParentMap, and the International Examiner. She has received awards from the Awesome Foundation, 4Culture, and the City of Seattle’s Office of Arts & Culture and is the poet laureate of the City of Redmond. She lives in Seattle with her acupuncturist husband and toddler. @shinyupai

He responded calmly and matter-of-factly about our upside-down finances without once meeting my gaze. My family lived comfortably but leanly in a mold and ant infested ranch-style house on the outskirts of Riverside, California, and I had believed in our middle-class illusion, despite watching my father cobble together an income as a used car salesman, college adjunct, and proprietor of several slowly declining businesses.

Love felt carefully budgeted, and so I worked hard to earn my father’s affection and approval. As an 8-year-old, I took on many tasks without pay: I made small talk with customers, processed phone orders, packaged power supplies for shipping, and typed letters and invoices. My parents were my models for labor, and from them I learned a deep work ethic, as well as a blurring of the boundaries between work and home life. They spent the ’80s and early ’90s jumping from one business to another: gift retail, leather imports, security alarms, and computer parts. When Commodore computers lost their market appeal, my parents embarked on farming shiitake mushrooms. I can still remember them coming home in the early morning hours covered in mud from picking. But despite my family’s financial instability, my life seemed carefree compared to my father’s childhood in post-war Taiwan, which was overshadowed by poverty, starvation, and constant military occupation.

I left home for college at the age of 17, knowing I’d need to find my own way. Armed with a handful of scholarships that ran out during my junior year, I eventually borrowed more than $50,000 to complete my liberal arts undergraduate education, pursue my fantasy of becoming a writer at the Jack Kerouac School of Disembodied Poetics, and continue my journey in art school. The burden of going so deeply into debt in my 20s stunted me. I had slowly paid it off by my late 30s, but I had spent nearly 15 years in a constant state of paralysis about my finances. My daily anxieties ranged from whether I could pay rent to whether I could afford bus fare or gas, or put a postage stamp on a letter.

Years have gone by, and now that my partner and I have recently decided to buy our first home, I’ve realized the necessity of more deeply understanding my feelings toward obligation. Why, when it comes down to it, would I feel better about owing $450,000 to Fannie Mae than accepting the down payment offered by my parents?

The debt that I owe them is insurmountable and something that my father never ceases to remind me of. He cast off his culture, family, and identity to immigrate. His unshakable belief that human beings enter this world owing everything — their possessions, their karma, their lives — to their ancestors perpetuates a Confucian system of debt bondage that has haunted his entire life and pervaded mine. Like my father, who is indebted to his parents and the ancestors who first brought his family from China to Taiwan, I inherited a debt that can never be repaid: the debt of being born, and of choosing a life different from the one my parents wished for me.

The exchange between human beings is one that might be based not in economic imperatives — but in the act of love.

When I married, I paid a small fraction of what I owed to my parents, and again when I gave my father a grandson, who will continue the family line. And yet the debt to my family continues to accrue, leading me to deep confusion about the worth of my work and the essential value of my life as a human being.

Despite that pain, I’ve been curious and eager to rethink it all. In my late 20s, I met a holistic healer and teacher through my literary community in Dallas. Dr. Gregg embodied abundance and the very opposite of the tallying of accounts and favors. He didn’t operate from a fundamental position of scarcity but lived a life overflowing with richness. I watched him mentor and influence my partner as a holistic practitioner, as well as empower many others to break through their own pain and discomfort to find healing. And even today, Dr. Gregg remains my on-call go-to person for questions related to my son’s health. He has never ceased to give his energy freely, in a way that has confirmed to me that the exchange between human beings is one that might be based not in economic imperatives — but in the act of love.

Through uncoupling my feelings about financial debt from the burden of family obligation, it becomes possible to imagine another life — one in which debt, along with its sibling, guilt, has lost its energetic potency and has been left to be buried with my ancestors. I try to picture interactions with my family that are free of duty and expectation, and I feel reassured knowing that this disquiet won’t be passed on to my son, Tomo, as he owes me nothing.

Shin Yu Pai is the author of several poetry collections, most recently AUX ARCS (La Alameda, 2013) and Adamantine (White Pine, 2010). Her essays have appeared in Tricycle, ParentMap, and the International Examiner. She has received awards from the Awesome Foundation, 4Culture, and the City of Seattle’s Office of Arts & Culture and is the poet laureate of the City of Redmond. She lives in Seattle with her acupuncturist husband and toddler. @shinyupai

The Debt Sketchbook

You might have seen illustrations by contributing artists sprinkled here and there. Well, here is the entire sketchbook — from playful to insightful.

FeaturedThe Fear Project

“Do you fear debt?” That’s what artist and Ohio University visual communications professor Julie M. Elman asked fans of her 3-year-old “Fear Project,” in which people describe their fears to her. She then illustrates them and posts them on social media. What follows is sometimes a lively social media discussion of that fear, not unlike a crowdsourced group therapy. Comfort comes as people realize they are not alone in even the strangest of fears—from moths to dentists. When it came to the fear of debt, however, people weren’t so talkative. Elman concluded that perhaps personal financial trouble may be too shameful for public scrutiny. To see Elman’s collection of fear illustrations, go to fear-project.com or read our own story about it.

Essay: Thoreau Was My Financial Adviser

Kaci Yoh

The cost of a thing is the amount of what
I will call life which is required to be exchanged for it,
immediately or in the long run.”
Henry David Thoreau, Walden

These words hit me hard at the age of 29. It was 2008, and depending on the hour, I was watching my marriage unravel, witnessing the collapse of the financial markets from the office of my first-year financial planning business, or determining whether I was even or underwater on a 2,500-square-foot McMansion. Collectively, my husband and I were $275,000 in debt.

Kaci Yoh is a Colorado-based writer whose work has appeared, or is forthcoming, in Yoga Chicago, Whole Life Times, Hanuman Yoga Festival, Recovering Yogi, Estes Trail Ascent, Poesy Magazine, and prAna. She has a B.S. in psychology and is a registered 200-RYT. Visit her at simplelifegoodlife.com.

Walden sat on my bookshelf for years. I would open it, read a few lines, and put it away. But as I got closer to my 30th birthday, being a person who didn’t finish things bothered me more than ever. I was tired of being too busy to focus and feeling too afraid to sit still.

One day I picked up the book and read it all the way through. I looked around my home and finally understood: I was drowning in debt, and my lifestyle was making me miserable. I exhausted hours every Sunday dusting, vacuuming, and mopping. I spent the majority of my time either working to pay for things like furniture or electronic gadgets or fearfully maintaining them by obsessively dusting and scrubbing. I could see my future, and it looked bleak.

So did my marriage. When my husband and I started dating 10 years prior, we embraced our differences and learned from one another. Now we barely saw each other, and when we did, we butted heads, often about our finances. Deciding to divorce was a heartbreaking process. I sold most of my possessions to pay off my debt and donated the rest; he kept the house. By the end, everything I owned fit into my compact car. Then, watching the financial markets implode under the pressure of greed and deceit, I realized my career in financial planning was the next to go.

Thoreau said, “Things do not change; we change,” and that’s exactly what I did.

Once the dust had settled on all the changes in my life, Thoreau’s passages continued to echo in my mind, pointing me toward yet another self-discovery: my spending habits. Up to this point, they had largely been invisible, so changing them required a burgeoning awareness and discipline. First, I listed all of my fixed expenses in a spreadsheet. Then, I began carrying around a notebook to record all of my spending. It was tedious, but the knowledge I gained was
invaluable.

I was surprised to learn that the way I spent money was mostly about pleasing other people — it had little to do with my own enjoyment. In fact, I didn’t even know what I enjoyed. During the week, I had spent money going to happy hour in order to network with the affluent business crowd. On the weekends, I had gone out with my husband to eat dinner or see live music. Instead of feeling thrilled and pampered, I just felt stressed and guilty about spending money I didn’t have. I was busy consuming and spending, too busy to feel alive.

Seven years have gone by since I left that lifestyle, and so much has changed. I now make about half the annual income I once did, teaching yoga, writing about health and wellness, and waitressing part time. I have good days and bad days, but I no longer feel controlled by debt. I take 12–16 weeks off each year and one winter spent four months on the Big Island of Hawaii, eating homemade dinners on the beach and listening to the trumpets of humpback whales. In moments like those, when the magic and wonder of the world offer themselves so vividly, I experience so much gratitude for simply being alive.

But, of course, it hasn’t been easy. At first it was scary for me to move away from the crowd. I felt vulnerable saying no when I had spent my life saying yes. I had lived to please others and had struggled to fulfill their expectations rather than my own. But now, true to Thoreau, I’m less inclined to exchange my life for trivial things, and I have become richer for it. My relationships are more authentic, my health more vibrant, and my time more precious. Instead of cleaning a McMansion on Sunday mornings, I call my mom or hike in the mountains near my home. For me, a simple life is a good life, the only kind of life I want to lead.

Kaci Yoh is a Colorado-based writer whose work has appeared, or is forthcoming, in Yoga Chicago, Whole Life Times, Hanuman Yoga Festival, Recovering Yogi, Estes Trail Ascent, Poesy Magazine, and prAna. She has a B.S. in psychology and is a registered 200-RYT. Visit her at simplelifegoodlife.com.